Choosing the Right Amount of Insurance for Your Home Insurance Needs

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Choosing the right amount of home insurance can be difficult. Home insurance is a mystery for many people, especially first-time home owners.  This article will outline some factors to keep in mind to make your decision easier when looking for the best package for you.

 What is Home Insurance?

Home insurance covers the replacement cost of your home and its contents, in case of an emergency such as fire, damage or theft.  Home insurance can cover the cost of the loss of your home, as well as some of your living expenses in case your home becomes uninhabitable for a period of time due to an emergency. Without home insurance, the cost for repair or replacement of your home and belongings as well as paying for supplemental housing can be a financial disaster for you and your family.

 How Much Home Insurance Do You Need?

How much home insurance do you need? When reviewing your policy, you will want to look at any limits on repairs and on the amount of money you will be reimbursed for supplemental housing.  Most importantly, you need enough coverage to rebuild your home if it is destroyed or pay for any extensive damage due to fire, explosion, theft or other cause of damage.

 

To purchase home insurance, it is important to know the total cost of rebuilding your home.  This figure is different than the resale value of your home. The resale value of your home includes the value of the land your home was built on. Also, the construction of a single home may cost more than the construction of multiple homes. Builders often minimize the cost of materials and labor by building multiple homes at one time. To determine the cost to rebuild your home, you should also consider the value of upgrades you made to your home such as a new kitchen and bathroom, furnishing a basement or adding insulation and energy efficiency measures.

 

Also, don’t confuse the cost to rebuild your home with the cost to pay your mortgage.  Mortgage balance and replacement cost are two different things and your mortgage balance does not impact the cost to rebuild your house.

 

To find out the cost to replace your home, you can get a replacement cost appraisal from a building contractor or real estate appraiser to give you a detailed estimate of this cost and a realistic picture of how much insurance coverage you require. 

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